Air Liquide chairman and CEO Benoit Potier attends a news conference in Paris yesterday. The $143-a-share cash offer by Air Liquide, which represents a 50% premium to the
20-day average price before Tuesday’s announcement, comes four years after Airgas fought off a hostile bid that was about half the value.

Bloomberg
Paris

Air Liquide’s $10.3bn takeover of rival Airgas gives the European company a leading share of the US market in industrial gases amid forecasts of further construction and manufacturing growth.
The $143-a-share cash offer, which represents a 50% premium to the 20-day average price before Tuesday’s announcement, comes four years after Airgas fought off a hostile bid that was about half the value. The deal validates Airgas founder and chairman Peter McCausland’s strategy of acquiring hundreds of smaller companies over three decades to form the largest US supplier of gases used in welding and healthcare.
Buying Airgas, which gets 98% of its revenue from the US, would help Paris-based Air Liquide leapfrog competitors Linde AG, Air Products & Chemicals and Praxair to the top spot in North America. The deal comes four years after Air Products abandoned a $5.9bn hostile bid for Airgas when a Delaware judge upheld a poison-pill takeover defence.
The “expensive” price Air Liquide is paying reflects “a hefty scarcity premium that still lingers in the consolidated world of industrial gases,” JPMorgan Cazenove analysts including Martin Evans wrote in a note yesterday. The deal shows Air Liquide wants to broaden its portfolio and increase coverage in the US, where there is still growth.
Air Liquide shares fell as much as 5.8%, the most since August 24, and were trading down 4.8% at €117.70 at 10:18am in Paris. Airgas rose 29% to close at $137.35 in New York on Tuesday. Both companies confirmed the deal in a statement Tuesday after Bloomberg News reported they were in talks.
“The US is a very attractive gas market, it’s the largest industrial gas market worldwide,” Air Liquide chief executive officer Benoit Potier said on a conference call about the deal. “It’s the fastest growing market among advanced economies.”
Low natural gas and energy prices are “driving investment and manufacturing,” he said.
Within the $13bn-plus US market for packaged gases and welding equipment, Airgas has a 25% share, the most of any player, according to data compiled by the company, while Air Liquide is fourth. Antitrust concerns over the deal are limited, said Jason Miner, an analyst at Bloomberg Intelligence in Skillman, New Jersey.
The acquisition, which is subject to the approval of regulators and Airgas shareholders, would be Air Liquide’s biggest, according to data compiled by Bloomberg. The deal could also help the company overtake Linde as the world’s biggest industrial gas company by revenue. Air Liquide says it plans to realise more than $300mn of pretax cost savings, mostly within two to three years.
Air Liquide has been adding plants in North America, Asia and the Middle East to process gases used in the chemicals, refining, and electronics industries, while also expanding in medical gases and health-care services in Europe.
In 2012, Germany’s Linde similarly used its acquisition of Clearwater, Florida-based Lincare Holdings, valued at about $3.8bn, to expand its US presence. The deal puts Air Liquide “at the indisputable number one position, well ahead of Linde,” Kepler Cheuvreux analyst Martin Roediger wrote in a note.
The US has become a growth priority for European industrial companies, attracted by lower energy costs. Airgas is an opportunity for Air Liquide to “re-balance” its portfolio of assets as growth in emerging and developed economies converge, the French company’s chief financial officer Fabienne Lecorvaisier said in a phone interview.
“It’s the last game-changing deal in this industry, which will make us a leader for a considerable number of years,” she said. The takeover accord includes a break-up fee that, while not offering complete protection from a rival offer, still makes it “very expensive” for someone to outbid Air Liquide, the CFO said.
Any competing bid is unlikely given the high premium offered by Air Liquide, analysts at Robert W Baird & Co said in a note.
Air Liquide has committed bridge financing for the transaction and intends to refinance the debt through a capital increase of €3bn ($3.2bn) to €4bn, and a combination of US dollar and euro long-term bonds. The enterprise value of the deal is $13.4bn.
“We see this as a big price,” Societe Generale analysts including Peter Clark said in a research note. The deal adds €12.5bn in debt to Air Liquide’s estimated net debt of €6.8bn at the end of this year, they said.
Air Liquide’s gas and services sales in the Americas represented 24% of its total revenue in gas and services last year. Combined with that of Airgas, the Americas would have accounted for 42%, with Europe representing 37% and Asia-Pacific 19%, the French company said in a presentation.
Barclays and BNP Paribas are Air Liquide’s financial advisers on the deal and are also underwriting the bridge financing. Cleary Gottlieb Steen & Hamilton and Bredin Prat are the French company’s legal advisers.
Goldman Sachs Group and Bank of America Merrill Lynch are financial advisers for Airgas and Wachtell, Lipton, Rosen & Katz is the company’s legal adviser.